Skip to main content

tv   Real Money With Ali Velshi  Al Jazeera  March 14, 2014 5:30am-6:01am EDT

5:30 am
transmitted for the first time and the first anniversary of his election of the bishop of rome. >> reporter: that story and the rest of the day's news can all be found on our website including much more on the crisis in ukraine which you can see on your screen there, all that and more at al jazeera. plus zombies and vampires in your neighborhood. how these real estate monsters could effect your ability to sell your home. i'm ali velshi. this is "real money." ♪ >> this is israel you are the most important part of the show, so join our live conversation for the next half on twitter, if you like facebook, i real all of your comments.
5:31 am
america's economy may be the world's largest, but second place china is growing at a much faster rate, that boosts growth in the rest of the globe. that's why a slowdown in china is already being felt here america and around the world. today we learned that china's growth in investment, retail sales and factory output slumped to multi-year lows snachl news out of china helped fuel a big drop in stocks today with the dow shedding 231 points in trading. the broader s&p 500 fell 1.2%. some markets in europe and asia witnessed even bigger losses. this comes out of a string of news in china. investors reacted specifically to some unusually frank comments by china's leader. he warned of severe challenges
5:32 am
facing china's economy in 2014. including soaring corporate debt, possible real estate bubble, and an economic slowdown. when the pee mere himself says the economy will grow by in his words about 7.5% this year, people take that seriously. the u.s. is expected to grow by about 2.8% this year. so china, at 7.5 is more than twice as fast as the u.s., but 7.5% is a lot slower than the 10%-plus growth that china experienced for most of the past three decades. china is at a cross road. its leaders want to wean the economy off of its independence of selling inexpensive manufactured goods to the rest they tried to let the value of china's currency rise against the dollar. now they appear to be reversing course.
5:33 am
the other way is to lean more heavily on china's consumers. in the short run that means slower growth than what the world and the china have come to expect. why do you care? because you are invested in china companies through your 401k, and ira's, what is more china is the biggest foreign holder of u.s. treasury. so we are all interconnected and china is so big now, that any slow down or a recession there will be felt by all of us. a weaker chinese economy spells troubles to a number of american industries who's profit and growth are tied to the chinese economy. ihs works with more than 700 of
5:34 am
america's fortune 500 companies. it has lowered its forecast for china's growth. and you are in line with the chinese government. it's important to tell our viewers, we don't often rely as fully on data from the chinese government as we do from other governments and we don't always trust them. so when they tell you things are bad, we trust them. >> that's exactly right. and the numbers are coming in as you are saying quite a bit weaker than most people thought. but beyond that there is some serious worries about a credit bubble and a real estate bubble in the chinese economy. they need grow at least 7% to absorb all of the migrant workers coming in from the rural areas into the cities. but they are also trying to squeeze the debt down. they are trying to get rid of
5:35 am
some of the excesses of the shadow bank system, and that's very tough balancing act. >> why are we struggling -- americans would be happy if we had 3% annual growth. why is 7.5 bad? >> the 7.5 is bad or troublesome because china needs to grow probably faster than that. because of all of the labor pressures that it has. namely all of these people coming from the farms into the cities, looking for jobs. they won't get jobs if china is growing slower, let's say than 7%. that's the worry. and the worry is social unrest that would come with such high unemployment rates in the urban areas of china. >> which we're seeing play out in other parts of the world. it plays out in so many different countries. let's talk about why this matters. draw the connection to the rest of the world. so china slows down a
5:36 am
little bit where are the rest of us concerned >> china is the second largest economy in the world has been growing very rapidly for some years now. and in that process, it has had a voracious appetite primarily for raw materials. one of the first things to react to slower chinese growth is of course copper prices and oil prices as well. so the biggest impact right off of the bat, we have already seen this is in commodity prices, because as chinese demand slows down, as you would expect the price of the come -- commodities is going to slow down. so all of this would get hit. >> if i'm the average american watching this, tell me what i kneeled to watch for.
5:37 am
obviously if i work for a commodity exporting company or an oil company, i can see how that might relate to me. in terms of the rest of it, what are the things i need to watch for that the chinese will be doing about their economy? >> well, probably the key indicator is are they going to start opening up the flood gates again? in other words are they so worried about growth or will they become so worried about growth that they start to loosen up. probably they will first do it through things like lowering reserve requirements on bank deposits. or go the root of lowering interest rates. so the thing to watch is do they stay the course and tough love or do they sort of go back to the future in terms of what they have done in the past? >> you always make it so clear. thank you so much for being with us. let's talk about that chinese consumer, pick up a
5:38 am
children's toy here in the united states, and there's a good chance you'll find the words made in china stamped on it. but one toy manufacturer in pa is turning that trend on its end by selling american-made toys in creates interlocking construction toys. he joins me from the company's headquarters in hatfield, pennsylvania. and you can see what they are. that's them behind you. interlocking rods kind of like tinker toys. that's right. which we make as well. >> you have gone into the chinese market on like an amazon type of site? >> yes it's the combination of amazon and ebay in china. and we started to grow there. and part of what you talked about a little bit is there is a
5:39 am
little bit of a new economy versus old economy happening in china. the new economy companies are doing quite well, and the older commodity companies are struggling a little bit. company have e-commerce as our platform allow access to all of those consumers and minimizing investment structure up front. >> so this slowdown means there may be fewer people coming into the middle class on an annual basis, but it is still going to be a lot more people than any ore country building a middle class, and that's where you are hoping to sell these shows. >> it sure is. you have got to have a portfolio approach to life. could this year be a little bit slower? sure. but what is going to happen over the longer term is that hundreds of millions of people will be
5:40 am
coming into a middle class have discretionary income and buy things like toys, et cetera. and i think there's a bit of a dichotomy between companies that are tied to gdp growth and companies like ours that won't feel the impacts. once you get to the size of pock for and gamble you feel that. >> yes, and in your case you are keep growing. you are on a section on this website that features made in america. i guess the chinese see it as some sort of status symbol to see made in america things. >> they really do. after flew went groups in china are looking for the big brand names from around the world. things from america and europe. french wine. so it's all of the things that are made in europe or not made
5:41 am
in china that become these status symbols. >> so it's important for american business people planning to do business in china that a slowdown still means a lot more potential customers every year for companies like yours. >> exactly right, ali. we may have a tough 2014, but as more consumers come online it is great. and i would encourage american companies to take that portfolio and say let's export beyond china. >> michael thank you for joining us. michael areten, the president and ceo of
5:42 am
k'nex. later zombie foreclosures and real estate vampires. i'll explain how each of them could affect home prices in your neighborhood. that story and more as "real money" continues. >> twenty five years ago, pan am flight 103 exploded in the skys above lockerbie. only one man was convicted of the attack >> the major difficulty for the prosecution, that there was no evidence... >> now a three year al jazeera investigation, reveals a very different story about who was responsible >> they refuse to look into this... >> so many people at such a high level had a stake in al megrahi's guilt. lockerbie: what really happened? on al jazeera america
5:43 am
>> an ameica tonight special series
5:44 am
>> this baby is in withdrawal... how addiction affects the most innocent. >> he just went quiet and his lips turned blue... >> is there hope? addicted in vermont on al jazeera america all right. we have been talking about china and how a clowedown there rattles global markets. turkey is another country unsettling markets of late. turkey has transformed itself into an emerging market powerhouse. it achieves spectacular growth under the leadership of prime minister rejeb tayep erdowan, but his government is now rocked by an on again off again series of treat protests. it's fuelling an exodus of investors out of turkey and emerging markets in general. patricia sabga explains. >> reporter: violent clashes
5:45 am
wednesday between protestors and turkish police sparked by the death of a teenage boy walkeded in anti-government demonstrations last year. turkey was perceived by foreigners as a nation on the way up. but the planned destruction of park in istanbul last may exposed cracks. when police violently disbursed peaceful protests by turks sparking mass demonstration against the government. calls for erdogen to step aside grew more intense following a december. >> economic factors are leading into a lot of the political unrest we're seeing arrange the world, but there are a lot of other factors that weigh in as well. >> reporter: last month an aledged voice recording
5:46 am
instructing his son to dispose of large sums of cash was leaked. >> you have people who have levers of power. they have the ability to start vince gagss. they have information that they have been leaking about his alleged corruption which involves tens of millions if not hundreds of millions of dollars, they out. >> reporter: this has fuelled an foreign exodus of cash from turkey. turkey's central bank dramatically raised interest rates. a move criticized by the embattled prime minister who has vowed to step down if his ruling party loses in local elections later this month. turkey is also wrestling with a high unemployment rate which stood over 9% in 2012. i want to turn now to ukraine. the country wants a $15 billion
5:47 am
from the international monetary fund to pay its bills and avoid default. today the head of the imf said the group's fact-finding team has made good progress and will stay in kiev to negotiate an economic reform program. joining me now from washington to discuss this development and a new imf report is david lipton, the imf's number two official. david thank you for being with us. let's talk about this latest development. your team is staying in kiev we assume that means to work on a rescue or assistance deal for the ukraine? >> they we have had a team there for about a week. the last few months have been very topsy turvey for the economy in ukraine. they have done that work. we have looked at their findings and now we're switching to having a negotiation to see whether they can embark on a program of reform and we can
5:48 am
support them with finance that will then catalyze support from countries ash the world. >> typically when the imf goes in and helps a country and puts conditions about reform, they are not faced with the same situation. is there some concern that the imf might put conditions on that could push people on the fence over to the russians? >> i think what is interesting right now, most interesting right now, is that the ukrainian -- the interim ukrainian government realizes the predicament they are in, and they are setting out to bring about economic reforms that will staebllize their country and create growth. they know that's important for their future. so i expect that we are going to see eye to eye about what is needed this ukraine. >> let's talk about income inequality. you pout a report on that globally. and the report makes mention that greater income inequality can be
5:49 am
detrimental to achieving economic stability. what evidence do you have of that? >> we have received data that shows that income inequality can be bad for growth and redistribution, if it helps lower inequality, may be helpful and this looks at a wide range of countries over a long period of time, and says that on average any efforts to redistribute have reduced in allty. so what we have done today is a very different matter. the study we have put out today tries to answer the question, if a country wants to redistribute, what are the ways to do it? we know redistribution can be pushed too far, the question is how to do it well? and we have tried to lay out a
5:50 am
don'ts? >> you know in this country alone and in other places, there are some people who think the entire concept of redistribution is incorrect. your report recommends raising property taxes, raising the eligibility age for government retirement programs, some of these programs will encounter stiff opposition from policy makers. it seems to work in theory, does the report offer any mreng a decisions on how it works in practice? how politicians can go to these people and say this is what has sustainable. >> countries will choose whether or not they want to redistribute, we're trying to offer better and worse ways. if you raise income taxes as the united states does and you spending money on health and education, that is helping people who are more disadvantaged have greater
5:51 am
opportunities, we define that as part of this puzzle. yes, issues like progressivety of tax systems and other features of tax and spending systems are also important. we try to go through using our experience around the world to say what works and to try to see how this can be done without imposing inefficiencies. >> david lipton a pleasure to talk to you. thank you for joining us. >> thank you very much. all right. they are look right now in towns and cities across america. real estate zombies and vampires. coming up how that creepy empty house on your block could factor into the housing market recovery. that and more as "real money" continues. keep it here. the stream is uniquely interactive television.
5:52 am
we depend on you, >> you are one of the voices of this show. >> so join the conversation and make it your own. >> the stream. on al jazeera america and
5:53 am
♪ let's talk foreclosures. overall foreclosure activity has
5:54 am
hit the lowest level in seven years, but there is still trouble lurking in the housing market. realty-track says february foreclosure filings dropped 10% from january, and are down an impress if 27% from a year ago. that is the lowest level since back in december of 2006. the broader trend has been so positive that realty-track says for closure activity is no longer the biggest threat to the housing market. but there's another problem lurking. the high number of zombie foreclosures. that's when a home is vacated by the distressed owner and left unat tended. these make up 21% of all properties in foreclosures. these states are among the states with the greatest number of these so-called zombies. these houses have been in the foreclosure process for years
5:55 am
and tend to bring down the value of the houses in the surrounding neighborhoods. they are worse than vampire foreclosures, homes still occupied by the owner even though the bank has filed forforeclosure. darren bloomquist coined the term and says zombie foreclosures and vampire real estate are very well problems. thanks for joining us. >> thanks for having me. >> the home has been foreclosed on but the person who lived in it, still lives in it. that's not as bad because it is still being maintained. >> that's right. the occupied foreclosures will look like any other property when you pass by. and so they are not a visible danger to the housing market,
5:56 am
but -- but they still are a threat because what they represent is a homeowner in there -- it is still a distressed property that at some point is going to have to be taken out of the hands of that home owner and transferred into the hands of a new home owner, so it represents some pent-up inventory that is not really being recognized that still needs to be absorbed -- >> part of what we refer to as shadow inventory. there are houses for sale, and a whole lot of houses that are possibly not for sale that could start to flood the market. >> that's right. and real stores will talk about lack of inventory in the market, and one of the reasons is some of this distress in the form of these vampire foreclosures have been held back. and the homeowner is still living there, but that may give a false sense of where -- >> new york is a perfect
5:57 am
example. there's -- the prices are so high because there aren't enough houses available for people. let's talk about zombies. the house has been vacated. the foreclosure is finish, maybe it's not. and the house just sits there. >> yeah, actually the problem here is the foreclosure has not been finished. the bank in a lot of cases has decided not foreclose on the property, typically because it's a very low value property, but the home owner has moved out, so nobody is claiming responsibility for the home. it's the eye sore in the neighborhood, but nobody is responsible for taking care of the home or claiming responsibility so it falls into disrepair, drives down the neighborhood value and the value of the homes around it. >> all right. we'll keep an eye on both of these things. darren good to see you. darren bloomquist, the vice
5:58 am
president at realty-track. up now follow up to are a story i brought you earlier this week, about trains carrying billions of barrels of oil through american cities. we took you to albany, new york, it's all part of america's frac-ing boom that is tapping in to oil and natural gas in north dakota and other stateds. trains have derailed, causing explosions, and that has albany worried. and now we have learned that albany has put a moratorium of the processing of the oil at the port. this is a problem for global partners. it says it will work with officials. but my money i think albany's
5:59 am
concern is welcomed. regulators and public officials need to make sure that the nation's rail tine -- rail lines and oil tankers that travel on them are improved and monitored. tomorrow the global trend of moving from the countryside to the cities is coming to america. i'm ali velshi. thanks for joining us. ♪ >> i thought that she was my property, and i could do as i please. >> abusive men... >> this is completely unregulated.. >> easy access to guns... >> there's somewhere around 1600 women being held every year >> a deadly combination... >> death could have been prevented... >> her and a hundred more women... >> it hurts to the core
6:00 am
>> faultlines al jazeera america's hard hitting... ground breaking... truth seeking... >> they don't wanna see what's really going on >> break though investigative documentary series death in plain sight only on al jazeera america widening the search for the missing malaysia airliner to the indian ocean and the plane may have flown for hours before dropping from radar. a historic weekend that could shape the future of ukraine as proantiand russians clash in one part of the country and another section of the country will vote on cessation and